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Could pot solve Michigan’s budget problems?

Bill Laitner, Michigan.com
Published 8:28 a.m. ET April 20, 2015

Sin taxes — the taxes on tobacco, alcohol, and... perhaps soon to be on marijuana in Michigan other states that might legalize cannabis. A few states, led by Colorado, already are reaping pot taxes.

There’s green glowing in the eyes of those who’d reap tax bonanzas from marijuana. The poster child is Colorado, which raked in $8.8 million in January and $9.1 million in February from marijuana.(Photo11: WILLIAM ARCHIE/Detroit Free Press)

Story Highlights

Michigan, other states and the federal gov’t all need more tax revenue, but nobody wants a tax hike.

So three Michigan groups, including two of mainly conservatives, want to legalize and tax cannabis.

Legalized marijuana is the only new source of significant income for government in sight, they say.

Opponents say the social costs of legalizing the drug would outweigh the revenue gains.

Michigan’s state budget is so tight it squeaks — while roads crumble, schools drown in debt and local officials demand a return of state aid.

Across the country, federal needs pile up, as well, from airport runway repairs to zebra mussel monitoring. Yet state and federal lawmakers are loathe to raise taxes.

Enter marijuana.

Coast to coast, there’s green glowing in the eyes of those who’d reap tax bonanzas from marijuana, and it’s not from the pot. It’s from the color of money.

“Let’s face it — this is one of the last places, aside from printing money, that we’re going to find more money” for government spending, said Matt Marsden, spokesman for a Pontiac-based group of Republicans called the Michigan Cannabis Coalition. The group hopes to start circulating petitions by June calling for the legalization of marijuana, said Marsden, 41, of Clarkston.

The Pontiac coalition is one of three groups pushing ballot proposals to legalize marijuana in Michigan. Each is aiming for the November 2016 election, and each is hyping the tax dollars they’d collect. In a sign of changing political times, two of the three groups are driven by Republicans, traditionally not the ones who push for new taxes. They insist that, even on today’s date of 4/20 — synonymous with stoners getting high — they’d never puff a marijuana cigarette.

“Our proposal is not about pot. It’s about the revenue and jobs that are going to be created,” said Marsden, a former legislative staffer for Republican state and congressional lawmakers. To that end, the group he represents calls its proposal the Michigan Cannabis Control and Revenue Act.

The group wouldn’t dictate the amount of a marijuana tax, Marsden said.

“We’re leaving it up to the Legislature to decide how to tax this, including the edibles, oils, extracts and anything else associated with marijuana. But whatever it comes to — $150 million or $200 million or $400 million a year — that’s money we don’t have coming into the state of Michigan right now,” he said.

Currently, medical marijuana sellers in Michigan do not charge sales tax on their cannabis because drugs and food are exempt from the state’s 6% sales tax.

The coalition would earmark revenue for “three specific areas of the budget — education, public safety and public health,” he said. Last week, the group submitted its ballot language to the state Board of Canvassers.

Legalization groups across the country have been eying tax bonanzas in the handful of states that have pioneered legal cannabis. The poster child is Colorado, which raked in $8.8 million in January and $9.1 million in February from marijuana — generated by a 10% special sales tax on pot, plus the existing 2.9% state sales tax, along with licensing fees paid by marijuana retailers and growers, according to the state’s website. Multiplied over a year, that comes to well over $100 million.

Add to that a projected $18 million a year that Colorado may collect this year from its 15% excise tax on wholesale marijuana sales, said Chris Lindsey, a legislative analyst with the Marijuana Policy Project, a pro-marijuana group in Washington, D.C.

Lansing could take in more than $180 million a year if Michigan “adopts a regulated adult retail program, with excise tax rates that are based on Colorado’s,” Lindsey said. That figure doesn’t include payroll and income taxes for employees in the marijuana trade, nor the cost savings achieved by not paying to arrest, convict and jail marijuana users, he said.

After decades of advocating legal marijuana, and making little progress, groups like the Marijuana Policy Project now see government fiscal crises across the country as opening the door to legalization.

In Michigan, another ballot proposal is coming from a Lansing-based group that is mostly Democrats but also has a few conservative Libertarians. The group said it believes its ballot proposal could raise more than $200 million in taxes for state tax coffers, said Jeff Hank, a lawyer who chairs the Michigan Comprehensive Cannabis Reform Initiative.

“As of right now, we’d designate 40% for the Michigan Department of Transportation, 40% to the state school-aid fund and 20% would go back to local governments,” said Hank, 34, a Lansing defense attorney.

“We may tweak that, but right now, we’re seeing popular support for those levels” in private polls, he said. The group hopes to submit ballot language to the state Board of Canvassers this week, he said.

One concern shared widely by those who favor taxing marijuana is to avoid setting the tax too high, as Matt Abel said is the case in Colorado.

“I have a receipt from a dispensary I went to out there last year, and the tax was almost 30%,” said Abel, executive director of Michigan NORML — the state chapter of the National Organization for the Reform of Marijuana Laws.

“We don’t want to encourage the underground economy” in Michigan by overtaxing marijuana, said Abel, a Detroit lawyer and board member of the Lansing-based initiative.

Opponents of legalization contend that the costs to society of greater drug abuse will outweigh any benefits from tax revenues. That’s a point argued by former U.S. Secretary of Education William Bennett in his book published in February called “Going to Pot: Why the rush to legalize marijuana is harming America” (Center Street: $20).

Bennett’s book compares marijuana to alcohol, which he says costs society more than $100 billion a year in law enforcement for criminal conduct, treatment for alcoholism, unemployment and health care.

“In stark contrast, combined state and local tax revenues on alcohol amount to just over $6 billion a year,” Bennett writes. Bennett dismisses the reports from Colorado that “we are getting more revenue and not any of the harm predicted” by saying it’s too early to be sure of that.

But polls increasingly show that a majority of Americans, albeit by a slim margin, favor regulating marijuana, much in the same way alcohol is regulated.

A third group of Michiganders that wants to legalize marijuana is a conservative group that would steer the tax revenue to local communities, ignoring the state budget, said Paul Welday, a former chair of the Oakland County Republican Party.

“Let’s face it — a lot of people don’t trust their state legislators,” said Welday, 56, of Farmington Hills. A big shortcoming of Proposal 1, the state ballot proposal for fixing roads and aiding schools — which Michiganders will decide May 5 — “is that there’s great skepticism about state government,” he said.

So the Michigan Responsibility Council, which Welday represents, wrote tentative ballot language to have marijuana taxes benefit local governments — cities, townships and villages. But the group won’t dictate how the money should be spent, he said.

“A lot of people talk about pot for potholes, and that’s cute, but we don’t think it should be that narrow. We’re talking about pot for parks, pot for public safety, pot for really any local need,” Welday said.

The Michigan Responsibility Council has yet to decide whether to jump into the race of ballot proposals, although “we are operating under the assumption that there are changes in the wind as far as marijuana goes in Michigan,” Welday said.

“We began with the premise that marijuana should be taxed and regulated like alcohol,” a concept that is spreading fast among conservatives, he said.

Those who favor legalizing marijuana in Michigan have long considered their main opponent to be Attorney General Bill Schuette.

Schuette spoke out vigorously against legalizing medical marijuana before state voters passed Michigan’s medical marijuana act in 2008. After that, the well-known conservative took a hard line against cannabis and its users, medical and otherwise.

And Schuette’s staff attorneys supported efforts by Oak Park, Utica and other communities to keep marijuana proposals off their local ballots.

Yet, in a visit last week to the Free Press offices in Detroit, Schuette sounded unexpectedly mellow about the proliferation of proposals to make marijuana legal in Michigan.

“Let them get it on the ballot and let the voters decide — that’s my perspective,” he said with a smile.